NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
|
PRINCIPAL BUSINESS ACTIVITY, MATERIAL DEFINITIVE AGREEMENT AND SIGNIFICANT ACCOUNTING POLICIES
|
Interim Financial Statements
The consolidated financial statements include the
following: 1) Balance sheets as of March 31, 2017 and December 31, 2016; 2) Statements of Operations for the three months ended
March 31, 2017 and March 31, 2016; and 3) Statement of Cash Flows for the three months ended March 31, 2017 and March 31, 2016. They are unaudited.
However, in the opinion of management of the Company, these consolidated financial statements reflect all material adjustments,
consisting solely of normal recurring adjustments, necessary to present fairly the consolidated financial position and results
of operations for such interim periods. The results of operations for the interim periods presented are not necessarily indicative
of the results to be obtained for a full year. The accompanying consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and
Rule 8-03 of Regulation S-X for smaller reporting companies. Accordingly, these consolidated financial statements do
not include all of the information required by U.S. generally accepted accounting principles for complete financial statements. These
unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and
notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with
the Securities and Exchange Commission on April 28, 2017.
Liquidity and Going Concern
Going Concern - The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company generated a net loss for the three month period ending March 31, 2017 of approximately
($1,498,000) and had negative working capital and stockholders’ deficiency of approximately $4,860,000 at March 31, 2017.
Since, inception the Company’s growth has been funded through the issuance of convertible debt, borrowings under lines of
credit and internal operations These factors, among others, may indicate that the Company will be unable to continue as a going
concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations
and ultimately to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements
do not include any adjustments that might result from the uncertainty.
Basis of Consolidation
The consolidated financial statements include assumed
former liabilities of our former parent company, NaturalNano, Inc., a Nevada corporation, and Omni
Shrimp, Inc., a Florida corporation. All significant inter-company accounts and transactions have been eliminated in consolidation.
Accounting for Reverse Capitalization
The Company follows the guidelines set forth in
Topic 12: Reverse Acquisitions and Reverse Capitalizations of the SEC Financial Reporting
Manual (“SEC Manual”)
for the acquisition of Omni Shrimp, Inc. (“Omni”) (See
Material Definitive Agreement
below.) For both accounting
purposes, Omni Shrimp, Inc. (“Omni”) has been deemed the acquiring entity due to the fact that the owners of Omni have
effective voting and operating control of the combined company. The Company believes it was not a shell company.
On July 5, 2016, the staff
of the Securities and Exchange Commission’s Division of Corporation Finance advised the Company that in light of the information
set forth in the Form 8-K filed on June 29, 2016, the Staff was of the opinion that the Company was a “shell company”
as defined in Rule 405 under the Securities Act of 1933 and Rule 12b-2 of the Exchange Act. The Company replied with a letter to
the Staff contesting the factual basis of such determination, and the Staff replied with a subsequent letter affirming its prior
determination.
Pursuant to the SEC Manual, the Company filed a
form 8-K/A on September 1, 2016. In Item 9.01 of that filing, the Company reported the required financial statements, including
audited financial statements of Omni and pro forma financial information.
Material Definitive Agreement
The Company announced on June
23, 2016 (the “Effective Date”), it entered into a Share Exchange Agreement (the “Exchange Agreement”) with
all of the shareholders of Omni Shrimp, Inc., a Florida corporation (“Omni”), pursuant to which the shareholders exchanged
with the Company all of the outstanding shares of stock of Omni and Omni thereupon became a wholly owned subsidiary of the Company.
In consideration for the exchange of those Omni shares, the Company issued 28,500 shares of a newly created Series E
Preferred Stock of the Company (the “Series E Preferred Stock”).
As a result of their ownership
of the Series E Preferred Stock, the Omni shareholders acquired the right to vote 95% of the voting control of the Company. The
Series E Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to 95% of the outstanding
common stock after the conversion. In addition, on the Effective Date, the holders of all of the Company’s outstanding Series B
and Series D Preferred Stock, including James Wemett, who is a director of the Company and was an officer and principal
shareholder of the company prior to the effective date, as the holder of the Series D shares, surrendered those shares to
the Company.
Additionally, on the Effective
Date the Company entered into an Asset Purchase Agreement with James Wemett, the former President and CEO, pursuant to which Mr.
Wemett acquired all right, title and interest to the existing business activities of the Company prior to that date; specifically,
those activities were (i) developing and commercializing material additives based on a technology utilizing halloysite nanotubes
and (ii) reselling Ebola personal protective equipment and ancillary supplies, and assumed the related liabilities. In connection
with that transaction, Mr. Wemett waived all accumulated compensation due to him from the Company.
In connection with the Asset
Purchase Agreement, the Company and Mr. Wemett exchanged releases, and the Company issued to Mr. Wemett a six year divisible Warrant
with cashless exercise to purchase up to 2,000,000 shares of the Company’s common stock at a purchase price of $0.05 per share.
Description of the Business
Omni Shrimp, Inc. (“Omni” or the “Company”
or “we”) was organized on September 22, 2015 with executive offices located in Madeira Beach, Florida on the Gulf of
Mexico. Omni is a wholesaler of locally caught wild American shrimp, predominantly the highly popular Key West pink variety. Customers
are large distributors in the US, who then resell the product to grocery store chains, restaurants and other retail stores in the
Florida, Boston and New York markets.
Omni does not own vessels nor have employees who
are involved with the catching, transporting or processing of shrimp. Omni’s business model is as follows:
|
●
|
We purchase shrimp from incoming vessels
|
|
●
|
Through brokers, we arrange for sales to distributors.
|
|
●
|
We refrigerate as inventory that we cannot immediately sell
|
|
●
|
We process at a facility in Louisiana if purchasers require certain needs (e.g.- shrimp are to be headless)
|
|
●
|
We send directly to customers the remainder
|
Estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ
materially from these estimates. On an ongoing basis, we evaluate such estimates. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about
the carrying values of assets and liabilities.
Fair Value of Financial Instruments
Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
●
|
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
|
|
●
|
Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.
|
A financial asset or liability’s classification
within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The carrying
amounts reported in the balance sheet of cash, accounts receivable, inventory, prepaid assets, accounts payable and accrued expenses
approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes
payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s derivative
liability was determined utilizing Level 3 inputs.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to
cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments
are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date,
with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments,
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or
equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the
Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the
convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring
measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process
of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair
value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears
in results of operations as a change in fair market value of derivative liabilities.
Income Taxes
The Company accounts for income taxes in accordance
with FASB ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current
year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred
income tax items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced
by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest related to unrecognized
tax benefits in income tax expense. Income tax expense was $0 for the three month periods ending March 31, 2017 and 2016.
Net income/ (Loss) Per Share
Loss per common share is computed by dividing net
income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss per
common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during the
period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss per
share as their effect is anti-dilutive based on the net loss incurred.
As of March 31, 2017 and 2016 there were
272,733,862 and -0- shares, respectively, underlying preferred stock, convertible debt, outstanding options and warrants that
could potentially dilute future earnings.
These potentially dilutive shares have been limited
by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of the dilutive instruments
such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such instruments shall be
limited to ensure that following such conversion the total number of shares of Common Stock then beneficially owned by the holder
does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock.
Shares associated with the issuance of Series E
Preferred stock are reported on an as converted basis.
Recent Accounting Pronouncements
In July 2015, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-011 to Topic 330, Inventory. This ASU requires
entities using inventory costing methods other than last-in-first-out and retail inventory method to value their inventory at the
lower of cost and net realizable value. This ASU is effective for fiscal years beginning after December 15, 2016 and is to be applied
prospectively. Early adoption of this ASU is permitted. The Company does not expect adoption of this ASU to have a material impact
on its Consolidated Financial Statements.
NOTE 2. ACCOUNTS RECEIVABLE
The Company has not set up any reserve against accounts
receivable at this time. Accounts receivable represent sales of shrimp not yet paid for. Sales terms vary with each contract but
payment is on average received within 30 days.
Balances of Accounts Receivables are as follows:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Gross accounts receivables
|
|
$
|
303,110
|
|
|
$
|
156,650
|
|
Allowance for doubtful accounts
|
|
|
—
|
|
|
|
0
|
|
Accounts Receivable
|
|
$
|
303,110
|
|
|
$
|
156,650
|
|
NOTE 3. INVENTORY
Inventory represents the cost of shrimp
caught but not yet sold. Shrimp may be retained for up two years in a refrigerated environment. As such, there is no
allowance for obsolescence
Balances of Inventory are as follows:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Gross Inventory
|
|
$
|
447,900
|
|
|
$
|
119,813
|
|
Allowance for Obsolescence
|
|
|
—
|
|
|
|
—
|
|
Inventory
|
|
$
|
447,900
|
|
|
$
|
119,813
|
|
NOTE 4. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following
at March 31, 2017 and December 31, 2016:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Property and Equipment
|
|
$
|
1,860
|
|
|
$
|
1,860
|
|
Accumulated depreciation
|
|
|
(1,063
|
)
|
|
|
(1,063)
|
|
Property and equipment, net
|
|
$
|
797
|
|
|
$
|
797
|
|
Property and Equipment is Office furniture and
equipment located at our Madeira Beach headquarters. No Depreciation expense on property and equipment was recorded for the three
months ended March 31, 2017 due to its immaterial nature.
NOTE 5. CONVERTIBLE NOTES PAYABLE
Convertible Notes payable totaled $ 1,111,727 and
$734,998 at March 31, 2017 and December 31, 2016, respectively as follows:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Convertible Notes Payable (at face value)
|
|
$
|
2,102,665
|
|
|
$
|
1,968,600
|
|
Unamortized discount
|
|
|
(990,938
|
)
|
|
|
(1,233,602
|
)
|
Convertible notes payable (net of discount)
|
|
$
|
1,111,727
|
|
|
$
|
734,998
|
|
At March 31, 2017, the balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Notes Payable
Balance
at March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
of Financing
|
|
|
Date
of
Maturity
|
|
|
Amount
of Financing
|
|
|
Conversions
|
|
|
Outstanding
Balance
|
|
|
Unamortized
Discount
|
|
|
Net
balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surrender
Agreement Notes
|
|
|
23-Jun-16
|
|
|
|
31-Dec-17
|
|
|
$
|
1,430,005
|
|
|
$
|
(9,615
|
)
|
|
$
|
1,420,390
|
|
|
$
|
707,287
|
|
|
$
|
713,103
|
|
Cape
One Notes
|
|
|
15-Dec-15
|
|
|
|
30-Jun-17
|
|
|
|
344,000
|
|
|
|
—
|
|
|
|
344,000
|
|
|
|
55,602
|
|
|
|
288,398
|
|
December
27, 2016 cash financing
|
|
|
27-Dec-16
|
|
|
|
27-Dec-17
|
|
|
|
128,775
|
|
|
|
—
|
|
|
|
128,775
|
|
|
|
95,611
|
|
|
|
33,164
|
|
November
25,2016 cash financing
|
|
|
25-Nov-16
|
|
|
|
31-Aug-17
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
4,113
|
|
|
|
3,387
|
|
Consulting
note-October 2016
|
|
|
1-Oct-16
|
|
|
|
31-Mar-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
0
|
|
|
|
20,000
|
|
Consulting
note-November 2016
|
|
|
1-Nov-16
|
|
|
|
30-Apr-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
3,333
|
|
|
|
16,667
|
|
Consulting
note-December 2016
|
|
|
1-Dec-16
|
|
|
|
31-May-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
6,740
|
|
|
|
13,260
|
|
March
21,2017 cash financing
|
|
|
21-Mar-17
|
|
|
|
21-Mar-18
|
|
|
|
57,000
|
|
|
|
—
|
|
|
|
57,000
|
|
|
|
55,438
|
|
|
|
1,562
|
|
February
13, 2017 cash financing
|
|
|
13-Feb-17
|
|
|
|
13-Feb-18
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
17,479
|
|
|
|
2,521
|
|
March
28,2017 cash financing
|
|
|
28-Mar-17
|
|
|
|
31-Dec-17
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
4,946
|
|
|
|
54
|
|
January
2017 consulting note
|
|
|
1-Jan-17
|
|
|
|
30-Jun-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
10,111
|
|
|
|
9,889
|
|
February
2017 consulting note
|
|
|
1-Feb-17
|
|
|
|
31-Jul-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
13,556
|
|
|
|
6,444
|
|
March
2017 consulting note
|
|
|
1-Mar-17
|
|
|
|
31-Aug-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
16,721
|
|
|
|
3,279
|
|
Convertible
Notes payable at March 31, 2017
|
|
|
|
|
|
|
|
|
|
$
|
2,112,280
|
|
|
$
|
(9,615
|
)
|
|
$
|
2,102,665
|
|
|
$
|
990,938
|
|
|
$
|
1,111,727
|
|
At December 31,
2016, the balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Notes Payable
Balance
at December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Financing
|
|
|
Date of
Maturity
|
|
|
Amount of Financing
|
|
|
Conversions
|
|
|
Outstanding Balance
|
|
|
Unamortized Discount
|
|
|
Net balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surrender Agreement Notes
|
|
|
23-Jun-16
|
|
|
|
31-Dec-17
|
|
|
$
|
1,430,005
|
|
|
$
|
(1,680
|
)
|
|
$
|
1,428,325
|
|
|
$
|
938,762
|
|
|
$
|
489,563
|
|
Cape One Notes
|
|
|
15-Dec-15
|
|
|
|
30-Jun-17
|
|
|
|
344,000
|
|
|
|
—
|
|
|
|
344,000
|
|
|
|
120,980
|
|
|
|
223,020
|
|
December 27, 2016 cash financing
|
|
|
27-Dec-16
|
|
|
|
27-Dec-17
|
|
|
|
128,775
|
|
|
|
—
|
|
|
|
128,775
|
|
|
|
127,364
|
|
|
|
1,411
|
|
November 25,2016 cash financing
|
|
|
25-Nov-16
|
|
|
|
31-Aug-17
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
6,532
|
|
|
|
968
|
|
Consulting note-October 2016
|
|
|
1-Oct-16
|
|
|
|
31-Mar-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
9,945
|
|
|
|
10,055
|
|
Consulting note-November 2016
|
|
|
1-Nov-16
|
|
|
|
30-Apr-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
13,333
|
|
|
|
6,667
|
|
Consulting note-December 2016
|
|
|
1-Dec-16
|
|
|
|
31-May-17
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
16,685
|
|
|
|
3,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Notes payable at December 31, 2016
|
|
|
|
|
|
|
|
|
|
$
|
1,970,280
|
|
|
$
|
(1,680
|
)
|
|
$
|
1,968,600
|
|
|
$
|
1,233,602
|
|
|
$
|
734,998
|
|
Financings
in 2016
Assumption of Convertible Notes Per
Surrender and Amendment Agreement
The following debtholders
of the Predecessor entity agreed to reduce the face value of the obligations owed to them by approximately $300,000 as well as
approximately $600,000 in accrued in interest. Subsequent to these reductions, the amounts owed to these creditors, which were
assumed by Omni were as follows:
$1,430,005 in convertible notes payable
as detailed below
$28,563 in accrued
interest (accounted for as accrued interest on the Balance sheet at March 31, 2017 and December 31, 2016)
Date
Issued
|
|
Description
|
|
Purchaser
|
|
Original
Amount
|
|
|
Face
value
Outstanding at
March 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/16
|
|
Interest
at the rate of 10%, and convertible
into
the Company’s common stock at a 50% discount of the lowest closing bid
price during the 30 trading days prior to conversion.
|
|
Alpha
Capital
Anstalt, LLC
|
|
$
|
900,000
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/16
|
|
Interest at the rate
of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the
30 trading days prior to conversion.
|
|
Marlin
Capital
LLC
|
|
$
|
210,000
|
|
|
$
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/16
|
|
Interest at the rate
of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price during the
30 trading days prior to conversion.
|
|
Bull
Hunter
LLC
|
|
$
|
140,000
|
|
|
$
|
140,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/16
|
|
Interest
at the rate of 10%, and convertible into the Company’s common stock at a 50% discount of the lowest closing bid price
during the 30 trading days prior to conversion.
|
|
Oscaleta
Partners
LLC
|
|
$
|
180,005
|
|
|
$
|
170,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Convertible debt from Surrender and Amendment Agreement
|
|
|
|
$
|
1,430,005
|
|
|
$
|
1,420,390
|
|
The Company accounted
for the assumption of the convertible promissory notes in accordance with ASC 815 “Derivatives and fair market value and
are marked to market through earnings at the end of each reporting period. The assumed value of the note was recorded net of a
discount of $1,430,005. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $707,287.
These notes mature on December 31, 2017 and bear an interest rate of 10%.
Cape One Master Fund II LP Convertible
Promissory Notes
Omni assumed $344,000 of convertible
notes owed to Cape One Master Fund II LP. The Notes have a face value of $344,000, carry an 8% interest rate, mature on June 30,
2017 and are convertible at $.02 per share.
The Company accounted
for the assumption of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and
are marked to market through earnings at the end of each reporting period. The assumed value of the note was recorded net of a
discount of $344,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $55,602.
The notes mature on June 30, 2017 and bear an interest rate of 8%.
December 27,
2016 Financing
On that date, the
Company issued a note for $128,775 comprised of various financings throughout the year. These notes were combined into a single
Note which was recorded on December 27, 2016. The Note is convertible into the Company’s common stock at a 50% discount
of the lowest closing bid price during the 30 trading days prior to conversion.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note were recorded net
of a discount of $128,775. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. The fair value of the conversion option on the date of issuance in excess
of the face amount of the note was recorded to interest expense on the date of issuance. At the balance sheet date, the remaining
unamortized discount was $95,611. The notes mature on December 27, 2017 and carry an interest rate of 10%.
November 25,
2016 Financing
On that date, the
Company issued a note for $7,500 The Note is convertible into the Company’s common stock at a 50% discount of the lowest
closing bid price during the 30 trading days prior to conversion.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $7,500. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $3,387.
Consulting Notes
October 2016
On October 1, 2016 the Company issued
a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on April
1, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount
of the lowest closing bid price during the 30 trading days prior to conversion. The conversion price is subject to anti-dilution
protection and down round provisions in the event that the Company issues additional equity securities at a price less than the
conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued
but unpaid interest.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized balance was $-. The
notes carry an interest rate of 10% and are at maturity.
November 2016
On November 1, 2016 the Company issued
a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on May 1,
2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of
the lowest closing bid price during the 30 trading days prior to conversion. The conversion price is subject to anti-dilution
protection and down round provisions in the event that the Company issues additional equity securities at a price less than the
conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued
but unpaid interest.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $3,333.
The notes carry an interest rate of 10% and are due on April 30, 2017.
December 2016
On December 1, 2016 the Company issued
a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on June 30,
2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of
the lowest closing bid price during the 30 trading days prior to conversion. The conversion price is subject to anti-dilution
protection and down round provisions in the event that the Company issues additional equity securities at a price less than the
conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued
but unpaid interest.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $6,740.
The notes carry an interest rate of 10% and are due on May 31, 2017.
Financings
in 2017
March 21, 2017
Financing
On March 21,
2017 the Company issued a note for $57,000 The Note is convertible into the Company’s common stock at a 50% discount of
the lowest closing bid price during the 30 trading days prior to conversion.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $57,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $55,438.
The notes mature on March 21, 2018 and carry an interest rate of 12%.
February 13,
2017 Financing
On February 13,
2017 the
Company issued a note for $20,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest
closing bid price during the 30 trading days prior to conversion.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. The fair value of the conversion option on the date of issuance in excess
of the face amount of the note was recorded to interest expense on the date of issuance. At the balance sheet date, the remaining
unamortized discount was $17,479. The notes mature on February 13, 2018 and carry an interest rate of 10%.
March 28, 2017
Financing
On March 28,
2017 the
Company issued a note for $5,000 The Note is convertible into the Company’s common stock at a 50% discount of the lowest
closing bid price during the 30 trading days prior to conversion.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $5,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $4,946.
The notes mature on March, 2018 and carry an interest rate of 10%.
Consulting Notes
January 2017
On January 1, 2017 the Company issued
a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on April
1, 2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount
of the lowest closing bid price during the 30 trading days prior to conversion. The conversion price is subject to anti-dilution
protection and down round provisions in the event that the Company issues additional equity securities at a price less than the
conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued
but unpaid interest.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized balance was $10,111.
The notes carry an interest rate of 10% and mature on June 30, 2017.
February 2017
On February 1, 2017 the Company issued
a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on May 1,
2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of
the lowest closing bid price during the 30 trading days prior to conversion. The conversion price is subject to anti-dilution
protection and down round provisions in the event that the Company issues additional equity securities at a price less than the
conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued
but unpaid interest.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $13,556.
The notes carry an interest rate of 10% and are due on July 31, 2017.
March 2016
On March 1,
2017 the Company issued
a convertible promissory note in the principal amount of $20,000 to an unrelated party. The convertible note matures on June 30,
2017 with the stated interest rate at 10%. The note is convertible into the Company’s common stock at a 50% discount of
the lowest closing bid price during the 30 trading days prior to conversion. The conversion price is subject to anti-dilution
protection and down round provisions in the event that the Company issues additional equity securities at a price less than the
conversion price. The Company may prepay the note at 150% of the entire outstanding principal amount of the note plus any accrued
but unpaid interest.
The Company accounted for
the issuance of the convertible promissory note in accordance with ASC 815 “Derivatives and fair market value and are marked
to market through earnings at the end of each reporting period. The gross proceeds from the sale of the note are recorded net
of a discount of $20,000. The debt discount relates to fair value of the conversion option. The debt discount is charged to interest
expense ratably over the term of the convertible note. At the balance sheet date, the remaining unamortized discount was $16,721.
The notes carry an interest rate of 10% and are due on August 31, 2017.
NOTE 6: ADVANCES FROM RELATED PARTY
Commencing in the fourth quarter of the
Fiscal year, Ms. Linda Giampietro, a related party of the Company advanced funds to the Company. All advances bear interest at
a rate of 1% per month with a minimum commitment on each advance of thirty days.
Advances from Related
parties are as follows:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Advances from Related Party
|
|
$
|
461,463
|
|
|
$
|
127,148
|
|
NOTE 7: DUE TO RELATED PARTY
The Company has been given access to
the Line of Credit that Madeira Beach Seafood, Inc. (“MBS”) has with Bank of America. As of December 31, 2016, Omni
Shrimp has utilized $196,000 from that line of credit. Interest, charge at a rate of 5.25% per year, is paid by Omni to MBS who
then pays the bank. The liability to Bank of America lies with MBS
Prior to the onset of operations at Omni
Shrimp, Inc., MBS advanced Omni $20,000 for the commencement of operations. Additionally, they funded Omni and additional $5,743
for expenses. As such, the liability to MBS is $25,743.
At March 31, 2017 and December 31, 2016,
the amount owed to MBS was as follows:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Amount forwarded from MBS from Bank of America line
|
|
$
|
196,000
|
|
|
$
|
196,000
|
|
Amount advanced by MBS to Omni Shrimp, Inc.
|
|
|
25,743
|
|
|
|
25,743
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding at March 31, 2017 and December 31, 2016
|
|
$
|
221,743
|
|
|
$
|
221,743
|
|
NOTE 8. DERIVATIVE LIABILITY
The Company’s
derivative liabilities as of March 31, 2017 and December 31, 2016 are as follows:
●
|
The debt conversion
feature embedded in the various Convertible Promissory Notes which contain anti-dilution provisions that would be triggered
if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described
in Note 2.)
|
●
|
Derivative liabilities
related to outstanding warrants and options due to the Company having insufficient authorized shares to satisfy the exercise
or conversion of all outstanding instruments as of March 31, 2017 and December 31, 2016.
|
The fair value of the derivative liabilities
as of March 31, 2017 and December 31, 2016 are as follows:
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Note conversion feature liabilities
|
|
$
|
2,976,952
|
|
|
$
|
2,077,850
|
|
Warrant liability
|
|
|
154,291
|
|
|
|
88,041
|
|
Total
|
|
|
3,131,243
|
|
|
|
2,165,891
|
|
NOTE 9. STOCKHOLDERS’
DEFICIENCY
Common Stock
Common Stock Issuances
During 2017, the
Company issued 1,948,977 common shares in satisfaction of $18,648 of principal obligations plus accrued interest to lenders on
convertible debt.
Warrants
The company
still has the following immaterial warrants outstanding from prior to our reverse merger on June 23, 2016.
|
|
2016
|
|
|
2017
|
|
|
|
Shares
|
|
|
Weighted
average
exercise
price
|
|
|
Weighted
average
remaining
life-Years
|
|
|
Shares
|
|
|
Weighted
average
exercise
price
|
|
|
Weighted
average
remaining
life-Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding:
beginning of the year
|
|
|
545,294
|
|
|
$
|
1.13
|
|
|
|
5.9
|
|
|
|
1,217,941
|
|
|
$
|
0.35
|
|
|
|
3.9
|
|
Granted
during the year
|
|
|
675,000
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
or forfeited
|
|
|
(2,353
|
)
|
|
$
|
102.00
|
|
|
|
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding: end of year
|
|
|
1,217,941
|
|
|
$
|
0.35
|
|
|
|
4.9
|
|
|
|
1,217,941
|
|
|
$
|
0.35
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercisable: end of year
|
|
|
1,217,941
|
|
|
$
|
0.35
|
|
|
|
4.9
|
|
|
|
1,217,941
|
|
|
$
|
0.35
|
|
|
|
3.6
|
|
As of March
31, 2017, the aggregate intrinsic value of the stock options outstanding and exercisable was $0.
Preferred
Stock Series E
The
Series E Convertible Preferred Stock is convertible into 95% of the Company’s common stock and votes on an as-converted
basis. The Series E designation limits the holders’ rights to convert its Convertible Preferred Stock, and the aggregate
voting powers, to no more than 4.99% of the votes attributable to the total outstanding common shares.
There
are currently 28,500 shares of Series E Preferred stock with a face value of $35. Dividends of $38,397 have been accrued as
of March 31, 2017.
NOTE
10. SEGEMENT DATA
The
Company’s operates in one segment, sales of shrimp and related products.
NOTE
11. LEASES
The
Company leases its office space at 13613 Gulf Boulevard, Madeira Beach FL. The monthly rent is $1,500, and rent expense for the
period ended March 31, 2017 was $4,500.
NOTE
12. RELATIONSHIPS WITH AFFILIATES
The
Management of the Company and the owners of MBS are the same. The Company believes that the following relationships with these
parties are to be disclosed:
Shared
Management
The
CEO, COO and Executive Vice President, Mr. Wrynn, Mr. Stelcer and Ms. Giampietro, respectively are all employees of MBS. Pursuant
to management contracts, a liability of $30,000 per month, $90,000 at March 31, 2017 has been incurred by the Company to compensate
MBS for their services in 2017.
Use
of Line of Credit
The
Company funds its operations in part through the use of MBS’ outstanding line of credit with Bank of America. Interest on
the line of credit is 5.25% per annum. As of March 31, 2017, the Company has borrowed $196,000 under this arrangement
Loans
from MBS
MBS
has loaned the Company approximately $25,000 since its inception. These loans are promissory notes with no due date or interest
rate
Rental
of Office space
The
Company rents its office space from MBS. Monthly rent is $1,500.
Shared
Administrative Personnel
The
accounting and record-keeping function at Omni Shrimp, Inc. is provided by personnel at MBS. No fee is charged for these services
The
Company’s President and Chief Executive Officer did not receive a management fee or other compensation in connection with his
services to the Company. The Company reimburses its President and Chief Executive Officer for all direct and indirect costs of
services provided and other expenses necessary or appropriate to the conduct of our business.
NOTE
13. SUBSEQUENT EVENTS
Issuance
of Debt
On
April 1, 2017, the Company issued a note for $5,000 for consulting services. The convertible promissory note bears no interest
and matures on October 1, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into
common stock at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion. As
of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.
On
April 27, 2017, the Company issued a note for $15,000 for cash. The convertible promissory note bears no interest and matures
on December 31, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into common
stock at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion. As of the
date of this filing, there have been no conversions of this Note and the entire amount is outstanding.
On
May 1, 2017, the Company issued a note for $5,000 for consulting services. The convertible promissory note bears no interest and
matures on November 1, 2017. The third party has the option to convert all or a portion of the note plus accrued interest into
common stock at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion. As
of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.
Issuance
of shares and Conversion of debt
Subsequent to the Balance sheet date, an investor converted $4,519 of principal debt and
accrued interest for 350,339 shares.
Consulting
Agreement
Commencing
with April 1, 2017, the rate for consulting services under the Consulting Agreement was $5,000 per month.
Change
in Legal Entity and stock symbol
As
of April 7, 2017, the Company changed its name to Omni Shrimp, Inc
.
Effective
May 3, 2107, the Company’s shares were traded under the symbol “OMSH.”